CA Supreme Court rules gig economy drivers are independent contractors

After nearly four years of court battles, Proposition 22—also known as the Protect App-Based Drivers and Services Act—has been upheld by the California Supreme Court. The voter-enacted law allows drivers for app-based transportation and delivery companies—also known as “network companies”—to be classified as independent contractors, as long as several conditions are met.

Summary of Proposition 22

In January 2020, Assembly Bill No. 5 (AB-5)—the landmark bill that created a streamlined test for determining which workers are independent contractors—took effect. AB-5 codified the “ABC test” set forth by the California Supreme Court in Dynamex Operations West, Inc. v. Super. Ct. Under the ABC test, a worker may be treated as an independent contractor only if the hiring entity can meet three conditions.

After the enactment of AB-5 made it virtually impossible to classify workers as independent contractors, many app-based transportation or delivery companies reclassified their drivers as employees and were therefore forced to provide all the benefits to which California employees are legally entitled (i.e., overtime, rest and meal breaks, and sick leave, among others). At the same time, the app-based transportation and delivery companies also lobbied for an exception to AB-5, declaring that app-based drivers were in fact independent contractors.